Canadian 'iPod tax' illegal, judge rules

Canada's levy on blank media that could be used to record copyright material does not apply to MP3 players, the Canadian Federal Court of Appeal has ruled.

While the Copyright Board of Canada is indeed permitted by Canada's Copyright Act to tax sales of blank media, the terms of the Act do not allow it to levy a similar fee from MP3 player makers, Mr Justice Marc Noël said.

Judge Noël admitted that the Board was acting from an understandable desire to recompense copyright holders for revenue lost when copies of their work are downloaded from P2P networks, but crucially "the authority for doing so still has to be found in the Act", he said.

As such the tax it levies on MP3 player sales are not legal.

That tax was imposed in December 2003. Since then the Board has demanded that player manufacturers cough up $2 for each player with a capacity of less than 1GB, $15 for 1-10GB players and $25 for devices with storage of more than 10GB. The levy was imposed to help compensate artists for music copied from P2P networks.

Under the terms of Canada's Copyright Act, the Copyright Board of Canada can apply levies on blank media to compensate copyright holders for "private copying". In 2000, the Board imposed levies on recordable CD media, having already applied one to blank audio cassettes.

Not surprisingly, player vendors weren't too happy about it and took the Board to court. The case finally ended up in the Court of Appeal, where Judge Noël yesterday delivered his verdict.

The immediate upshot of the judgement should be reduced prices for iPods and other players. Today, the Canadian AppleStore had yet to reduce the price of the 20GB and 40GB iPods, but presumably such a move can't be far off, particularly if other vendors quickly drop their prices.

Meanwhile, organisations such as the Canadian Private Copying Collective, which distributes the proceeds of the levies to artists and recording companies, are pondering whether to take the case to Canada's Supreme Court in a bid to have Judge Noël's ruling overturned, local newspaper the Globe and Mailreports.

At the very least, they are likely to lobby the Canadian government to amend the Copyright Act to take into account MP3 players and, indeed, to provide scope to cover future product developments. ®